The business behind the show

Lions Gate's largest shareholder, Mark Rachesky, gets into the picture

March 18, 2009 | 9:06
am

The plot is thickening at Lions Gate Entertainment.

Just as the company is girding for a potential proxy battle with corporate raider Carl Icahn, its largest investor, Mark Rachesky, has changed his status to "active" from "passive" investor and says he may seek a board seat.

Rachesky, who worked as an investment stategist for Icahn from 1990 to 1996, appears to be signaling that he backs -- at least for the moment -- Lions Gate management and is not aligned with his former employer, as some have speculated.

In a filing with the Securities and Exchange Commission today, Rachesky said he was "principally supportive of Lions Gate management and their publicly stated strategies." He further noted that "there are no contracts, arrangements, understandings or relationships (legal or otherwise)" between his invesment group and "any other person, including any other securityholder" (which would include Icahn).

Rachesky, 49, who holds both medical and MBA degrees from Stanford, owns almost 20% of Lions Gate through his New York-based MHR Fund Management LLC. MHR invests in "distressed and deeply undervalued middle-market companies," according to Rachesky's bio on Loral Space & Communications, a satellite company on which he serves as a non-executive chairman.

Rachesky's apparent show of support is in stark contrast to Icahn, who has publicly blasted the company for what he views as its "excessive" overhead and for its recent $255-million acquisition of the TV Guide Network and TVGuide.com, which he proclaimed "borders on recklessness." Lions Gate, Hollywood's largest movie and TV studio not owned by a media giant, produces the Tyler Perry "Madea" films and the cable shows "Mad Men" and "Weeds."

Adam Friedman, a spokesman for Rachesky, said the investor had no comment at this time.

Lions Gate spokesman Peter Wilkes also declined comment.

Rachesky said in today's filing that he had preliminary talks with Lions Gate about the possibility of adding a nominee to its 12-member board. He also said he may in the future discuss with the company "matters that may facilitate implementation of MHR's investment strategies and objectives."

Icahn, who owns 14.5% of Lions Gate, is threatening to launch a proxy fight after negotiations to gain several board seats broke down over, among other things, the studio's refusal to grant him assurances that a standstill agreement would also be applied to other shareholders seeking board seats. In recent days, Icahn made an offer to buy up to $325 million of Lions Gate public debt, which if successful and converted to equity, would double his stake.

This week, Lions Gate's defense team, which includes several blue chip firms with long pedigrees in hostile takeover battles, began to take shape. The studio has hired the law firm Wachtell, Lipton, Rosen & Katz, investment banker Morgan Stanley, the corporate public-relations outfit Joele Frank, Wilkinson Brimmer Katcher and the proxy solicitation firm Mackenzie Partners.